DUNDEE PRECIOUS METALS ANNOUNCES 2019 THIRD QUARTER RESULTS (All monetary figures are expressed in U.S. dollars
DUNDEE PRECIOUS METALS ANNOUNCES
2019 THIRD QUARTER RESULTS
(All monetary figures are expressed in U.S. dollars unless otherwise stated)
Toronto, Ontario, November 7, 2019 – Dundee Precious Metals Inc. (TSX: DPM)
THIRD QUARTER FINANCIAL AND OPERATING HIGHLIGHTS:
Consolidated gold production – Achieved record consolidated gold production of 65,642 ounces with
a strong quarter from Chelopech and Ada Tepe, transitioning DPM to a multi-asset mid-tier producer;
Chelopech – Achieved gold production of 40,328 ounces and copper production of 10.1 million pounds,
in line with its 2019 guidance;
Ada Tepe – Received its final operating permits, achieved full design capacity, produced 25,314 ounces
of gold in the third quarter and remains in line with its 2019 guidance;
Tsumeb – Advanced the maintenance shutdown during the quarter, achieved throughput of 42,186
tonnes and remains in line with its revised 2019 guidance issued in September;
Cash flow – Generated $22.7 million in cash flow from operating activities and $21.0 million in free cash
flow(1) and well positioned for a strong fourth quarter with over 20,000 ounces of unsold third quarter gold
production being delivered in the fourth quarter;
Cash Costs – Reported an all-in sustaining cost per ounce of gold(1) of $728 and a cash cost per tonne
of complex concentrate smelted, net of by-product credits(1), of $516, both of which remain on track to
achieve 2019 guidance; and
Financial position – Ended the third quarter with approximately $163 million of cash resources, including
undrawn portion of its long-term revolving credit facility (”RCF”).
“We are pleased with the results achieved at Ada Tepe, which de spite only ramping to full production by
mid-September, contributed to record gold production. It is imp ortant to recognize that third quarter sales
results were affected by higher c oncentrate inventory at both C helopech and Ada Tepe due to the timing
of concentrate shipments at Chelopech and the completion of trial lots and finalization of commercial sales
agreements at Ada Tepe. As a result, we expect a strong fourth quarter with sales being significantly higher
reflecting the drawdown of this inventory. Tsumeb completed rep airs to the offgas system and its planned
maintenance on October 25 and has been performing well since” s aid Rick Howes, President and CEO.
“We are now transitioning to a mul ti-asset mid-tier producer an d expect a significant increase in gold
production and cash flow going forward.”
Dundee Precious Metals Inc. (“DPM” or the “Company”) today reported third quarter net earnings attributable
to common shareholders of $7.7 million ($0.04 per share) compared to $20.3 million ($0.11 per share) for the
same period in 2018. Net earnings attributable to common shareholders in the first nine months of 2019 were
$21.6 million ($0.12 per share) compared to $39.4 million ($0.22 per share) for the same period in 2018.
Net earnings attributable to common shareholders in the third quarter and first nine months of 2018, and to a
lesser degree in 2019, were impacted by several items not reflective of the Company’s underlying operating
performance, including unrealized gains on commodity price hedges that, prior to the adoption of IFRS 9 in
2018, did not receive hedge accounting treatment and net gains and losses on Sabina special warrants, which
are excluded from adjusted net earnings(1).
Adjusted net earnings in the third quarter of 2019 were $4.6 million ($0.03 per share) compared to $17.8 million
($0.10 per share) for the same period in 2018. This decrease was due primarily to lower volumes of complex
concentrate smelted, lower volumes of payable metals in concentrate sold at Chelopech, as a result of the
timing of gold-copper concentrate deliveries and lower gold grades, and the commencement of depreciation at
Ada Tepe following the achievement of commercial production in June 2019, partially offset by higher realized
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gold prices, lower treatment charges at Chelopech, a stronger U.S dollar relative to the Euro and ZAR, higher
estimated metal recoveries at Tsumeb and the commencement of gold concentrate deliveries from Ada Tepe.
Adjusted net earnings in the first nine months of 2019 were $18.2 million ($0.10 per share) compared to $32.1
million ($0.18 per share) for the same period in 2018. This decrease was due primarily to lower volumes of
payable metals in concentrate sold at Chelopech, higher local c urrency operating expenses, the
commencement of depreciation at Ada Tepe and lower toll rates and volumes of complex concentrate smelted
at Tsumeb, partially offset by a stronger U.S dollar relative t o the Euro and ZAR, reduced deductions for
stockpile interest and higher estimated metal recoveries at Tsu meb, higher realized gold prices and the
commencement of gold concentrate deliveries from Ada Tepe.
Adjusted EBITDA
Adjusted EBITDA(1) during the third quarter and first nine months of 2019 was $32 .5 million and $83.2
million, respectively, compared to $35.9 million and $87.0 mill ion in the corresponding periods in 2018,
reflecting the same factors that affected adjusted net earnings, except for depreciation, interest and income
taxes, which are excluded from adjusted EBITDA.
Production
In the third quarter of 2019, gold contained in concentrate pro duced increased by 32% to 65,642 ounces,
including 25,314 ounces from Ada Tepe, which achieved full desi gn capacity in the third quarter of 2019,
and copper production decreased by 2% to 10.1 million pounds, in each case, relative to the corresponding
period in 2018.
In the first nine months of 2019, gold contained in concentrate produced increased by 4% to 161,101 ounces
and copper production decreased by 3% to 27.2 million pounds, in each case, relative to the corresponding
period in 2018. The increase in gold production was due primari ly to the start-up of Ada Tepe, partially
offset by lower gold grades at Chelopech, in line with its 2019 mine plan. The decrease in copper production
was due primarily to lower copper grades at Chelopech, in line with its 2019 mine plan, and lower ore
processed.
Complex concentrate smelted during the third quarter of 2019 of 42,186 tonnes was 38% lower than the
corresponding period in 2018 due primarily to the previously re ported pressurization event in the Ausmelt
offgas system on September 3, 2019 during a restart after routi ne maintenance. Repairs to the damaged
offgas system components were completed over a 14-day period and during the restart of the facility, it was
determined that the initial pressurization event had also cause d damage to the lining of the furnace. This
resulted in advancing the planned Ausmelt furnace reline, bagho use and ducting maintenance that were
completed over a 38-day period, 10 days longer than planned. This extension was due primarily to delays
in receiving materials that needed to be fabricated and shipped to site for installation ahead of the planned
maintenance schedule. The plant resumed operation on October 25, 2019 and is operating well. The next
Ausmelt furnace maintenance shutdown is currently scheduled for 2021, based on an expected operating
cycle of 18 to 24 months.
Complex concentrate smelted during the first nine months of 201 9 was 166,675 tonnes, which was
comparable to the corresponding period in 2018.
Metals Sold
Payable gold in concentrate sold in the third quarter of 2019 decreased by 5% to 38,148 ounces relative to
the corresponding period in 2018 due primarily to the timing of gold-copper concentrate deliveries and lower
gold grades at Chelopech, partially offset by gold sold at Ada Tepe following the achievement of commercial
production in June 2019. Payable copper in concentrate sold in the third quarter of 2019 of 6.6 million
pounds was 35% lower than the corresponding period in 2018 consistent with the decrease in gold-copper
concentrate deliveries. During the third quarter of 2019, there were two gold-copper concentrate deliveries,
as planned, whereas in the third quarter of 2018, there were three deliveries.
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In the first nine months of 2019, payable gold in concentrate s old decreased by 8% to 119,555 ounces
relative to the corresponding period in 2018 due primarily to the timing of gold-copper concentrate deliveries
and lower gold grades at Chelopec h, partially offset by gold so ld at Ada Tepe. Payable copper in the first
nine months of 2019 of 23.1 million pounds was 13% lower than the corresponding period in 2018 consistent
with the decrease in gold-copper concentrate deliveries.
Payable metals in concentrate sold for Chelopech and Ada Tepe i n the third quarter of 2019 were lower
than the payable metals in concentrate produced due to the timing of planned concentrate deliveries, which
is expected to result in payable metals sold being in excess of 20,000 ounces higher than payable metals
in concentrate produced in the fourth quarter of 2019. Chelopech and Ada Tepe remain on track to achieve
their respective 2019 delivery guidance.
Cost Measures
Cost of sales in the third quarter and first nine months of 201 9 of $71.8 million and $208.2 million,
respectively, was comparable to the corresponding periods in 2018 due primarily to the favourable impact
of a stronger U.S. dollar relative to the ZAR and Euro, which o ffset higher local currency operating
expenses, and lower volumes of gold-copper concentrate sold at Chelopech, partially offset by the
commencement of depreciation and gold concentrate deliveries at Ada Tepe following the achievement of
commercial production in June 2019.
All-in sustaining cost per ounce of gold in the third quarter o f 2019 of $728 was $108 higher than the
corresponding period in 2018 due primarily to a slower than ant icipated ramp-up to full production at Ada
Tepe, which resulted in lower gold production and higher cost p er ounce of gold in the period, lower gold
grades in gold-copper concentrate sold at Chelopech, lower by-product credits, as a result of lower volumes
of copper sold and realized copper prices, and higher cash outl ays for sustaining capital expenditures,
partially offset by a stronger U.S. dollar relative to the Euro and lower treatment charges at Chelopech.
All-in sustaining cost per ounce of gold in the first nine mont hs of 2019 of $751 was $144 higher than the
corresponding period in 2018 due primarily to lower gold grades in gold-copper concentrate sold, lower by-
product credits as a result of lower volumes of copper sold and realized prices, and higher cash outlays for
sustaining capital expenditures, partially offset by the favourable impact of a stronger U.S. dollar relative to
the Euro.
Cash cost per tonne of complex concentrate smelted at Tsumeb, net of by-product credits, during the third
quarter of 2019 of $516 was $154 hi gher than the corresponding period in 2018 due primarily to lower
volumes of complex concentrate smelted stemming from planned and unplanned downtime, partially offset
by the favourable impact of a weaker ZAR relative to the U.S. dollar.
Cash cost per tonne of complex concentrate smelted at Tsumeb, net of by-product credits, during the first
nine months of 2019 of $408 was $49 lower than the correspondin g period in 2018 due primarily to the
favourable impact of a weaker ZAR relative to the U.S. dollar a nd higher by-product credits as a result of
higher acid prices, partially offset by higher labour rates and higher fuel rates and consumption.
Cash provided from operating activities
Cash provided from operating activities in the third quarter and first nine months of 2019 was $22.7 million
and $46.5 million, respectively, compared to $34.5 million and $65.4 million in the corresponding periods
in 2018 reflecting the same underlying factors affecting net ea rnings, except for depreciation, and an
increase in working capital.
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Free Cash Flow
Free cash flow in the third quarter and first nine months of 20 19 was $21.0 million and $55.4 million,
respectively, compared to $25.1 million and $58.2 million in the corresponding periods in 2018. Free cash
flow was impacted by the same factors affecting cash provided from operating activities, with the exception
of changes in working capital, which are excluded from free cas h flow, and outlays for sustaining capital,
which are included in free cash flow.
Capital Expenditures
Capital expenditures incurred during the third quarter and first nine months of 2019 were $13.3 million and
$53.7 million, respectively, compared to $26.6 million and $83.8 million in the corresponding periods in 2018.
Growth capital expenditures (1) incurred during the third quarter and first nine months of 201 9 were $2.3
million and $35.0 million, respectively, compared to $20.0 mill ion and $65.9 million in the corresponding
periods in 2018. The period over period decline in growth capital expenditures was related principally to the
construction of the Ada Tepe gold mine. Sustaining capital expenditures(1) incurred during the third quarter
and first nine months of 2019 were $11.0 million and $18.7 million, respectively, compared to $6.6 million
and $17.9 million in the corresponding periods in 2018 due prim arily to the timing of executing planned
projects.
Timok Gold Project, Serbia
The Company filed NI 43-101 Technical Report supporting the pre liminary economic assessment (“PEA”)
of the Timok Gold Project on August 29, 2019. The PEA is based on the updated mineral resource estimate
completed in September 2018 and provides a base case, consideri ng primarily oxide and transitional
material types, upon which the project is now being optimized, including an economic evaluation of the
larger sulphide resource, prior to deciding on the initiation o f a pre-feasibility study. For additional details,
refer to the press release entitled “Dundee Precious Metals Fil es NI 43-101 Technical Report Supporting
the Preliminary Economic Assessment of the Timok Gold Project i n Serbia” dated August 29, 2019 found
on DPM’s website and filed on SEDAR at www.sedar.com.
Exploration
At Chelopech, diamond drilling continued from underground posit ions along the Southeast Breccia Pipe
Zone (“SEBPZ”) and from surface at the Wedge target. Early results from the Wedge target are encouraging
and drilling will continue at these locations and at the Krasta target in the fourth quarter of 2019.
At Ada Tepe, drilling commenced in the third quarter of 2019 on the Chiirite exploration license. During the
fourth quarter of 2019 exploration drilling is expected to cont inue at Chiirite and commence at the Elhovo
license.
In Serbia, two drill holes on the northern flank of the Bigar Hill deposit, demonstrated potential for previously
unknown mineralized trends outside the existing resource at the Timok Gold Project. At Tulare, a revised
geological interpretation was used to generate drill targets fo r higher grade gold-copper mineralization at
depth. Drill testing of priority targets is planned for the fourth quarter of 2019.
At the Malartic project in Quebec, field work, including prospecting, mapping and sampling, was carried out
in the vicinity of drill holes completed in 2019 as well as in areas of till and soil geochemical anomalies
identified in 2018.
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Financial Position
As at September 30, 2019, DPM had $15.4 million of cash, $45.0 million of investments, comprised primarily
of its 10.3% interest in Sabina, and $148.0 million of undrawn capacity under its RCF. With the start-up of
Ada Tepe and the corresponding e xpected increase in operating c ash flow, the Company amended the
terms and size of its RCF, resulting in, among other things, th e cancellation of tranches A and C in April
2019 and the increase of tranche B to $175 million from $150 million in June 2019.
(1) Adjusted net earnings, adjusted basic earnings per share, adjusted earnings before interest, taxes, depreciation and amortization
(“EBITDA”), all-in sustaining cost per ounce of gold, cash cost per tonne of complex concentrate smelted at Tsumeb, net of by-product
credits, free cash flow, and growth and sustaining capital ex penditures have no standardized meaning under International Financ ial
Reporting Standards ("IFRS"). Presenting these measures from period to period helps management and investors evaluate earnings
and cash flow trends more readily in comparison with results from prior periods. Refer to the “Non-GAAP Financial Measures” section
of the Management’s Discussion and Analysis for the three and nine months ended September 30, 2019 (the “MD&A”) for further
discussion of these items, including reconciliations to IFRS measures.
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KEY FINANCIAL AND OPERATIONAL HIGHLIGHTS
$ millions, except where noted
Ended September 30,
Three Months Nine Months
2019 2018 2019 2018
Revenue 94.9 104.3 279.4 294.1
Cost of sales 71.8 69.9 208.2 207.2
arnings before income taxes 11.6 21.7 28.3 46.1
et earnings attributable to common shareholders 7.7 20.3 21.6 39.4
asic earnings per share 0.04 0.11 0.12 0.22
Adjusted EBITDA(1) 32.5 35.9 83.2 87.0
Adjusted net earnings(1) 4.6 17.8 18.2 32.1
Adjusted basic earnings per share(1) 0.03 0.10 0.10 0.18
Cash provided from operating activities 22.7 34.5 46.5 65.4
Free cash flow(1) 21.0 25.1 55.4 58.2
Metals contained in concentrate produced:
Gold (ounces) 65,642 49,644 161,101 155,247
Copper (‘000s pounds) 10,142 10,308 27,219 28,114
Silver (ounces) 55,842 49,081 122,587 148,156
Payable metals in concentrate sold:
Gold (ounces) 38,148 40,324 119,555 130,140
Copper (‘000s pounds) 6,604 10,099 23,071 26,581
Silver (ounces) 28,987 45,230 91,947 135,817
All-in sustaining cost per ounce of gold(1) 728 620 751 607
Complex concentrate smelted at Tsumeb (tonnes) 42,186 68,431 166,675 168,982
Cash cost per tonne of complex concentrate smelted at
Tsumeb, net of by-product credits(1) 516 362 408 457
1) Adjusted EBITDA; adjusted net earnings; adj usted basic earnings per share; free cash flow; all-in sustaining cost per ounce of gold; and cash cost per
tonne of complex concentrate smelted at Tsumeb, net of by-product credits, are not defined measures under IFRS. Refer to the “Non-GAAP Financial
Measures” section of the MD&A for reconciliations to IFRS measures.
DPM’s unaudited condensed interim financial statements and MD&A for the three and nine months ended
September 30, 2019 are posted on the Company’s website at www.dundeeprecious.com and have been
filed on SEDAR at www.sedar.com.
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2019 Guidance
Overall Outlook and Strategy
DPM continues to focus on increasing the profitability of its business by optimizing existing assets including
the Ada Tepe gold mine which achieved full design tonnage at the mine and mill in September 2019. This
is expected to generate significant growth in gold production a nd cash flow, which will further strengthen
the Company’s balance sheet and s upport pursuing a variety of m argin improvement and growth
opportunities within its existing portfolio of assets. These growth opportunities include exploration programs
in Bulgaria, near Chelopech and Ada Tepe, and in Serbia, near t he Timok gold project, as well as new
investment opportunities that are consistent with the Company’s strategy. On October 28, 2019, DPM
invested Cdn$10 million pursuant to a private placement, resulting in an approximate 19.5% equity interest
in INV Metals Inc. (“INV”). This investment is in line with DPM’s disciplined capital allocation framework that
balances reinvesting capital in the business in an accretive ma nner with building financial strength and
returning capital to shareholders. DPM has a range of unique ex perience in permitting, developing,
underground mining, and processing with respect to projects sim ilar to INV’s Loma Larga. This technical
experience, along with DPM’s c ommitment to the environment and communities in which it operates, are
expected to be valuable to INV during the next phase of permitting.
Chelopech remains on track to achieve annual guidance and Ada Tepe remains on track to meet its updated
production and delivery guidance, issued in July 2019. AISC guidance remains unchanged. Cash cost per
tonne of ore processed guidance for Ada Tepe was lowered to a r ange of $50 to $55 from a range of $55
to $65 in line with year-to-date performance. In September 2019, the production guidance for Tsumeb was
revised to a range of 210,000 to 230,000 tonnes of complex conc entrate smelted and Tsumeb is on track
to meet this guidance, likely coming in at or below the midpoin t of the range. The next Ausmelt furnace
maintenance is expected to occur in 2021 allowing for additional smelter throughput in 2020.
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The Company’s guidance for 2019, together with its original guidance, is set out in the following table:
$ millions, unless otherwise
indicated Chelopech Ada Tepe Tsumeb
Updated
Consolidated
Guidance
Original
Consolidated
Guidance
Ore milled (‘000s tonnes) 2,100 – 2,200 442 – 462 - 2, 542 – 2,662 2,540 – 2,790
Cash cost per tonne of ore
processed(3),(4) 36 – 39 50 – 55 - - -
Metals contained in
concentrate produced(1),(2)
Gold (‘000s ounces) 155 – 187 45 – 60 - 200 – 247 210 – 262
Copper (million pounds) 33 – 39 - - 33 – 39 33 – 39
Payable metals in concentrate
sold(1)
Gold (‘000s ounces) 138 – 165 42 – 56 - 180 – 221 191 – 237
Copper (million pounds) 32 – 37 - - 32 – 37 32 – 37
All-in sustaining cost per ounce
of gold(3),(4),(5),(8) - - - 675 – 820 675 – 820
Complex concentrate smelted
(‘000s tonnes) - - 210 – 230 210 – 230 225 – 250
Cash cost per tonne of
complex concentrate
smelted, net of by-product
credits(3),(4) - - 380 – 450 380 – 450 380 – 450
Corporate general and
administrative expenses(3),(6) - - - 16 – 20 16 – 20
Exploration expenses(3) - - - 12 – 14 12 – 14
Sustaining capital
expenditures(3),(4),(7) 16 – 19 4 – 5 14 – 18 38 – 46 38 – 46
Growth capital
expenditures(3),(4) 4 – 5 25 – 27 - 29 – 32 29 – 32
1) Gold produced includes gold in pyrite concentrate produced of 43,000 to 53,000 ounces and payable gold sold includes payable gold in pyrite concentrate
sold of 30,000 to 35,000 ounces.
2) Metals contained in concentrate produced are prior to deductions associated with smelter terms.
3) Based on Euro/US$ exchange rate of 1.13, US$/ZAR exchange rate of 14.60 and copper price of $2.75 per pound, where applicable.
4) Cash cost per tonne of ore processed, all-in sustaining cost per ounce of gold and cash cost per tonne of complex concentrate smelted, net of by-product
credits, and sustaining and growth capital expenditures have no standardized meaning under IFRS. Refer to the “Non-GAAP Financial Measures” section
of the MD&A for more information.
5) Includes the treatment charges, transportation and other selling costs related to the sale of pyrite concentrate, and payable gold in pyrite concentrate sold.
6) Excludes mark-to-market adjustments on share-based compensation and MineRP Holdings Inc.’s (“MineRP”) general and administrative expenses.
7) Consolidated sustaining capital expenditures include $4 million related to Corporate digital initiatives.
8) All-in sustaining cost per ounce of gold represents Chelopech and Ada Tepe cost of sales less depreciation, amortization and other non-cash items plus
treatment charges, penalties, transportation and other selling costs, sustaining capital expenditures, rehabilitation related accretion expenses and an
allocated portion of the Company’s general and administrative expenses and corporate social responsibility expenses, less by-product revenues in respect
of copper and silver, divided by the payable gold in concentrate sold.
The 2019 guidance provided above is not expected to occur evenl y throughout the year. The estimated
metals contained in concentrate produced, payable metals in con centrate sold and volumes of complex
concentrate smelted are expected to vary from quarter to quarter depending on the areas being mined, the
timing of concentrate deliveries and planned outages. The rate of capital expenditures is also expected to
vary from quarter to quarter based on the schedule for, and execution of, each capital project.
Chelopech
Gold contained in concentrate produced is expected to be between 155,000 and 187,000 ounces in 2019,
reflecting grades returning to expected life of mine levels in 2019. As expected, gold production in the third
quarter of 2019 was lower than the first two quarters of 2019 a s a result of lower grades in the mining
sequence, combined with a lower gold recovery, each of which wa s in line with the mine plan. Copper
production in the period was in line with the mine plan. Chelop ech remains on track to achieve its 2019
production guidance.